Delivered strong net sales and operating profit growth within medium-term guidance
- Reported net sales of £17.1 billion, increased 10.7%, primarily reflecting strong organic net sales growth, and favourable impacts from foreign exchange.
- Organic net sales grew 6.5%. Price/mix of 7.3 percentage points reflects a high single-digit contribution from price and premiumisation.
- Reported volume declined by 7.4%, and organic volume declined by 0.8%.
- Growth reflects our advantaged portfolio of strong brands, diversified footprint, and premiumisation.
Resilient operating margin despite increased cost inflation
- Reported operating profit grew 5.1% to £4.6 billion. Reported operating margin declined by 147bps, with organic margin expansion more than offset by exceptional operating items and foreign exchange.
- Organic operating profit grew 7.0% and organic operating margin expanded by 15bps, driven by disciplined cost management. Price increases more than offset the absolute cost inflation impact on gross margin.
Advantaged portfolio and premiumisation drove market share growth
- Growth in organic net sales was delivered across most categories, particularly in our three largest categories: scotch, tequila and beer.
- Premium-plus brands comprised 63% of reported net sales, a 7 percentage point increase from fiscal 19.
- Total trade market share grew or held in over 70%(1) of total net sales value in measured markets.
Optimisation of portfolio through acquisitions and disposals
- Acquired Mr Black, a leading Australian premium coffee liqueur, Balcones Distilling, a Texas craft distiller and one of the leading producers of American single malt whiskey and Don Papa Rum, a super-premium, dark rum from the Philippines.
- Completed the sale of Guinness Cameroun S.A., disposed of Archers and completed the disposal and franchising of a portfolio of brands in India.
Invested to sustain long-term growth
- Increased organic marketing investment by 5.6%, reflecting strong, consistent investment in our brands.
- Invested £1.2 billion of capital expenditure (capex) in supply capacity, sustainability, digital capabilities and consumer experiences.
Continued cash flow generation and strong balance sheet
- Net cash flow from operating activities declined £0.9 billion to £3.0 billion.
- Free cash flow of £1.8 billion, declined £1.0 billion as strong growth in operating profit and favourable foreign exchange impacts were more than offset by higher year-on-year working capital outflows, tax and interest payments, and capital investment. Increased working capital reflects normalisation of creditors relative to fiscal 22 as our growth rate moderated in fiscal 23.
- Strong balance sheet, with leverage ratio(2) of 2.6x as at 30 June 2023, at the lower end of our target range, as a result of strong operating profit performance.
Continued progress in delivering Society 2030: Spirit of Progress ESG goals and doing business the right way
- Continued to reduce our absolute Scope 1 and 2 greenhouse gas emissions, achieving a further 5.4% reduction versus fiscal 22 and a cumulative 14.7% improvement from our 2020 baseline.
- SMASHED programme now live in 38 countries, and educated over 1.9 million young people, parents and teachers on the impact of underage drinking in fiscal 23, bringing the total to more than 3.7 million to date.
Continued creation of long-term shareholder value
- Increased basic eps by 17.6% to 164.9 pence and pre-exceptional eps by 7.6% to 163.5 pence.
- Increased recommended final dividend by 5% to 49.17 pence per share.
- Annualised total shareholder return was -2%, mainly driven by lower year-on-year share price. Total shareholder return, for the 5-year and 10-year periods of 7% and 9% respectively, remains strong.
- Completed a total of £1.4 billion return of capital in fiscal 23, which included £0.9 billion related to the completion of our
£4.5 billion multi-year programme, and returned an additional £0.5 billion during the second half. Today we announced a
new return of capital programme of up to $1 billion. - Starting in fiscal 24, in line with reporting requirements the functional currency of Diageo plc has changed from sterling to
the US dollar. Diageo has also changed its presentation currency to US dollar.(3)
See page 48 for explanation and reconciliation of non-GAAP measures, including organic net sales, organic marketing investment, organic operating profit, free cash flow, eps before exceptionals, ROIC, adjusted net debt, adjusted EBITDA and tax rate before exceptional items.
(1) Internal estimates incorporating Nielsen, Association of Canadian Distillers, Dichter & Neira, Frontline, INTAGE, IRI, ISCAM, NABCA, Scentia, State Monopolies, TRAC, IPSOS and other third-party providers. All analysis of data has been applied with a tolerance of +/- 3 bps. Percentages represent percent of markets by total Diageo net sales contribution that have held or gained total trade share fiscal year to date. Measured markets indicate a market where we have purchased any market share data. Market share data may include beer, wine, spirits or other elements. Measured market net sales value sums to 87% of total Diageo net sales value in fiscal 23. Effective fiscal 23, market share now reflects total on and off trade.
(2) Ratio of adjusted net borrowings to adjusted EBITDA. For further details see page 57.
(3) For further details, please see pages 7-8 and 47.
Debra Crew, Chief Executive, said:
“We have delivered strong fiscal 23 full-year results, with organic net sales growth of 6% and organic operating profit growth of 7%, both within our medium-term guidance. We expanded organic operating margin by 15 basis points in a challenging cost environment while continuing to invest in the business. These results demonstrate Diageo’s ability to consistently deliver resilient performance, even in challenging macro environments. I want to thank my colleagues, nearly 30,000 globally, for their dedication, creativity and agility in delivering these results. I am also proud of how our Diageo family has come together in recent weeks following the loss of our much loved and respected former CEO, Sir Ivan Menezes.
In fiscal 23, we drove double-digit organic net sales growth in scotch, tequila, and Guinness, with our premium-plus brands contributing 57% of overall organic net sales growth. We delivered strong growth in four of our five regions, with Europe and Asia Pacific growing double-digit. North America delivered stable performance as the US spirits industry continued to normalise post-pandemic, and we lapped strong comparators, particularly in the second half of fiscal 23. Globally, we gained or held share in over 70%(1) of total net sales value in our measured markets in fiscal 23.
Our culture of everyday efficiency and strong pipeline of productivity initiatives drove £450 million of savings in fiscal 23, fuelling sustained investment in brand building. Our revenue growth management capabilities, deep consumer insights, and smart reinvestment enabled us to take strategic pricing actions with precision and effectiveness. Through free cash flow delivery, we increased our capital expenditure, acquired a number of brands to strengthen our exposure to attractive categories and bolstered our investment in maturing stock in fiscal 23, positioning us well for sustainable, long-term growth.
Looking ahead to fiscal 24, I expect operating environment challenges to persist, with continued cost pressure and ongoing geopolitical and macroeconomic uncertainty. This requires us to move with greater speed and agility. My near term opportunities to drive the business focus on bolder and faster innovation, stepping up operational excellence to meet consumers' evolving tastes and preferences while driving scotch, tequila and Guinness.
Fiscal 24 marks the start of Diageo's next stage of evolution, and it is an incredible privilege to be leading the company through it. I believe total beverage alcohol (TBA) is an attractive sector underpinned by strong consumer fundamentals, including population growth, increased spirits penetration, and resilience in premiumisation globally. I see a long runway of future growth opportunities for Diageo to go after with our winning strategy. And, I firmly believe we have an advantaged portfolio to capitalise on, to drive sustainable long-term growth and generate value for shareholders. I am excited to work with our teams around the world to capture the opportunities ahead.”
(1) Internal estimates incorporating Nielsen, Association of Canadian Distillers, Dichter & Neira, Frontline, INTAGE, IRI, ISCAM, NABCA, Scentia, State Monopolies, TRAC, IPSOS and other third-party providers. All analysis of data has been applied with a tolerance of +/- 3 bps. Percentages represent percent of markets by total Diageo net sales contribution that have held or gained total trade (on and off trade) share fiscal year to date. Measured markets indicate a market where we have purchased any market share data. Market share data may include beer, wine, spirits or other elements. Measured market net sales value sums to 87% of total Diageo net sales value in fiscal 23. Effective fiscal 23, market share now reflects total on and off trade.
Results, reports and presentations